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Friday, September 18, 2009

Work starts in Manukau on destroying wealt

Matthew Dearnaley at the NZ Herald has written a report on how construction is about to start on the first new rail line (not widening) in Auckland for 80 years - a branch from the Main Trunk to a station at Manukau City.

The report tells you the line is costing $90 million:

$50 million from Kiwirail. He doesn't tell you that Kiwirail didn't raise the money through a loan, to be paid off from future access charges from Veolia (the operator of passenger trains in Auckland). No. It comes from tax. Kiwirail will never get a cent of this back to return. $50 million is for the track, alone. Note that the last government paid $81 million for the entire Auckland rail network between Swanson to the west and Papakura to the south, with all branches in between. $50 million for 2 km of track tells you how little it is worth once it is built. You wont be able to sell the line for a tenth of that.

$33 million from Manukau City Council. This is for the new station and associated bus station, and the earthworks associated with the project. At least buildings have alternative uses, but $33 million? $39 million is the cost for the expanded Wellington international airport terminal. The difference is that the users (airlines and passengers) are paying for that. No doubt this could all be reused so will have some value. By the way, the money comes from ratepayers in Manukau City.

$7 million from a combination of Auckland Regional Holdings (the money from the privatisation of the Yellow Bus Company that is sitting around accumulating interest waiting to be wasted on projects like this), and NZTA (for the local road improvements around the site). ARH money is Aucklanders' money, NZTA is from road users.

Not a cent from future users? Matthew didn't ask why.

The line will carry trains how often? Every 20 minutes at peak times (I assume he made a typo). So watch the tumbleweeds go past the rest of the time. Meanwhile, the parallel motorway being built - the Manukau extension to SH20, which will link the Southern Motorway to the recently extended SouthWestern motorway through to Mt Roskill, wont be sitting for 20 minute intervals without a single vehicle.

600000 users a YEAR are predicted. Wow, sounds a lot? Hmmm. That's 2400 a day, if divided up to every weekday, excluding public holidays. To get some perspective on this we are talking about:- The new motorway will carry 30,000 vehicles a day on average each with at least one person- Wellington Cable Car (one vehicle every 10 minutes) carries around 3200 a day, 7 days a week.- Fullers Ferries carry around 1.2 million users a year;- the Northern Express bus route using the Northern Busway carries over 120,000 users a MONTH;- Wellington's Johnsonville line carries 1.2 million users a year, it's long been considered marginal at best, and at off peak times has trains carrying less than single bus loads every half hour.

So 600000 a year for $90 million, let's say a 30 year payback period for the line, except the users aren't paying for it. So it is $5 per person per trip over 30 years, excluding interest, plus the cost of the train subsidy ($3.69 per passenger trip in 2002) plus the cost of the train itself.

I also remember seeing an economic benefit cost analysis, which said for every dollar spent on this project, it would generate 40c in savings for users and motorists. So it destroys wealth on every measure.

It would have been nice had Matthew Dearnaley in the NZ Herald had asked some simple questions like that. You know, the sort of thing a journalist does. Questions like:1. What contribution will users make to the costs of building the line and station? (none)2. What are the NET economic benefits of this project? (negative)3. How many cars a day will this project take from roads and what will be the reduction in delays? (not a lot)4. What would $90 million do elsewhere?...

I can answered the last. $90 million would:- Cover the planned property purchases for the Waterview connection motorway;- Is almost the total cost of maintaining all of Auckland City Council's roads ($93 million);- Almost the total cost of renewal of all State Highways in the Waikato ($92 million);- Pay 90% of the cost of the East Taupo bypass.

Oh and remember this is advocated by local politicians. Take this:

"Manukau Mayor Len Brown says he expects the new station to rival Newmarket as the second busiest in the region behind Britomart when it opens in early 2011".

Given Auckland's trains carry about 7 million trips a year, and Wellington's still carry around 9.5 million, in a metropolitan area with one quarter the population, you can see how it is easy to be a little cynical about vast amounts of money going into the train set.

Especially when the money almost entirely comes from people who wont benefit one jot from it.

"the last government paid $81 million for the entire Auckland rail network between Swanson to the west and Papakura to the south, with all branches in between."

- The $81m was spin - it was $96m. You have to include the $15m in phony line maintenance (that was never carried out) in the deal. 3 years worth of changing lightbulbs was never worth $15m.

The $81m was created to make it seem less than it was. Cullen stepped in when the stupid ARC was about to sign off on $120m via its incompetent negotiator. Cullen - showing all the acumen of the outrageous deal that he did last year with the Aussies - had to show he got a better deal than the ARC... when in fact he did not do much better (with the then American and Richwhite interests that controlled the rail company at the time). It is worse than what even you say - and considering the pasting you've given them that is some feat.

Destruction of wealth. LOL. Nothing like a libertarian to tell it how it aint. This is a new rail line not a bombing scene in Bahgdad. Real wealth is being destroyed by the billions everyday looking after western business interests in countries where the populations are not well disposed to the west. The railway will eventually become part of a larger more effective people mover. It's difficult to see what good will come out of the current situation in the middle east. Best let these people sort out their affairs themselves and save trillions along the way.

Tim: I remember the $81m as I was working on it at the time, it was thetransfer directly to Tranz Rail (and most of it went in special dividend to shareholders), but yes it was all outrageous. Treasury's best estimate of genuine value was $20m and it was clear the whole lot was able to be got for $1 not long after. After all, had it all gone belly up, the land was unable to be reused for anything other than a railway, without some serious changes in planning designations.Anonymous 1: So what's the line worth for sale when it's built? Not what it costs to build it. Nothing like a socialist to not understand capital value, but it is "an effective people mover". It is like buying an Airbus A380 to fly people from Auckland to Wellington, effective but grossly oversized. What do YOU call building something that is worth less than what you paid to build it?

Anonymous 2: Go on, what ones? Most of them are not "mine" but the NZ Herald report. The stats are not "completely inaccurate", but make a general point. However, be more useful if you supplied new stats and sources, instead of coming here to do a shit.

Problem is Liberty; we're spending so much more than an average city on transport with our car-obsessed infrastructure. So how can that be? You never mention all those people on the motorway had to buy and run a car, put petrol in etc... etc... eat up lots of land with roads roads roads roads and there's all those acres of parking in Manukau City somebody has to pay for. I think you should consider things in a bit more depth.

Anonymous:1. Who is this "we"? People choose to buy cars, a lot of people like owning a car. The mass media shows that car ownership is quite a hobby and many car owners will talk about their cars. "Car obsessed" is an emotional response, when in fact it is a choice. Aucklanders chose in droves after the war to buy cars, abandon trams, railways and buses. Fare revenue dropped so that in many cases those services were uneconomic. Now motorways were subsidised prematurely at the time which made driving even more attractive, but buses also could have used motorways (yet the ATB wasn't innovative enough to do so).

The thing is you aren't paying for the parking or the motorways, motorists are paying for it or private property owners of the carparks.

Presumably you're advocating spending $90 million of other people's money on a rail link that will have no value beyond scrap and a building (maybe $1 million?), will be grossly underutilised according to forecasts, and has benefits that are less than half the costs.

The money can be spent better elsewhere, and the fact it is almost the total cost of one year's expenditure maintaining Auckland City's substantial local road network tells you how ridiculous it is.

What rail enthusiasts ALWAYS fail to answer is that only 12% of Aucklanders work in the CBD. Perhaps only another 3% work adjacent to another rail station AND live adjacent to one that services it. So after you've spent a fortune on a railway to service the CBD, how does everyone else get to work?

Oh and while Auckland has a higher proportion of costs on transport, has it occurred to you that it may be lower on housing, and lower on taxes. New world cities cannot be helpfully compared to centuries old European cities on many measures. The most important being that the average Auckland has more living space than the average European.

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About Me

Life, liberty and the pursuit of happiness. Politics, philosophy and economics from a pro-capitalist, libertarian, objectivist perspective. Born in New Zealand, live in the UK, career has been in transport, telecommunications and infrastructure policy.